Insta
Genuine Startup Investments Exceeding Fair Market Valuation Won’t Be Taxed: Government Clears Air On Angel Tax
Swarajya Staff
Dec 20, 2018, 11:06 AM | Updated 11:06 AM IST
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
The Union government moved to assuage the startup and VC (Venture Capital) community by stating on Wednesday (19 December) that “genuine” investments in startups won’t attract tax liability despite exceeding fair market valuation, reports Mint.
This assurance from the government comes in the aftermath of news reports suggesting that the Union Corporate Affairs Ministry (MCA) had issued notices to over two thousand startups. These startups, whose valuations had fallen after the first round of funding, had issued new shares at a premium.
Under the Income Tax Act, this share premium received by the startups from the investors more than their fair value was treated as ‘income from other sources,’ and attracted tax liability.
While the startups contend that this ‘angel’ tax imposes extra costs on them and threatens their growth, the government notes it helps to prevent politicians and others from obtaining bribes from startups in guise of premiums on unlisted shares.
It was earlier reported that the Commerce Minister had taken up this issue with the Union Finance Ministry and a decision could soon be taken on the subject. Even the Central Board of Direct Taxes (CBDT), has also been roped in to provide inputs on the same.
“DIPP has again taken up this matter of issue of IT notices with the DoR (department of revenue) so that there is no harassment of angel investors or startups. Government is committed to protecting bona fide investments into startups,” DIPP (Department of Industrial Policy and Promotion) said in a statement.
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
Support Swarajya's 50 Ground Reports Project & Sponsor A Story
Every general election Swarajya does a 50 ground reports project.
Aimed only at serious readers and those who appreciate the nuances of political undercurrents, the project provides a sense of India's electoral landscape. As you know, these reports are produced after considerable investment of travel, time and effort on the ground.
This time too we've kicked off the project in style and have covered over 30 constituencies already. If you're someone who appreciates such work and have enjoyed our coverage please consider sponsoring a ground report for just Rs 2999 to Rs 19,999 - it goes a long way in helping us produce more quality reportage.
You can also back this project by becoming a subscriber for as little as Rs 999 - so do click on this links and choose a plan that suits you and back us.
Click below to contribute.